Introduction to Stablecoins
Stablecoins are a form of cryptocurrency that is pegged to official currency, making them different from other cryptocurrencies like Bitcoin, which have no innate monetary value and are therefore volatile. The governor of the Bank of England, Andrew Bailey, has stated that it would be "wrong to be against stablecoins as a matter of principle" amid the broad debate over the future of money.
Regulation of Stablecoins
However, Bailey stressed that widely used stablecoins should be regulated in a similar way to traditional money. This regulation is necessary to ensure that stablecoins can co-exist with traditional money in a changed financial system. The central bank will publish a consultation on stablecoins in the UK in the coming months, which will look at how they can be regulated.
Co-existence of Physical and Digital Money
Bailey said that physical money assets and digital assets can co-exist in a changed financial system. He also stated that it is possible to separate money from credit provision, with banks and stablecoins co-existing and non-banks carrying out more of the credit provision role. However, he emphasized that it is essential to consider the implications of such a change thoroughly before going ahead.
Access to Bank of England Accounts
The governor said that widely used UK stablecoins should have access to accounts at the Bank of England in order to reinforce their status as money. This will be a critical part of creating an advanced regime for stablecoins, one that ensures the UK can reap the benefits while maintaining a stable financial system.
Conclusion
In conclusion, stablecoins have the potential to play a significant role in the future of money, and their regulation is essential to ensure their safe and effective use. The Bank of England’s plans to publish a consultation on stablecoins in the coming months will be an important step in shaping the future of stablecoins in the UK. By regulating stablecoins and allowing them to co-exist with traditional money, the UK can reap the benefits of this new technology while maintaining a stable financial system.
